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Oil prices surged higher Monday, pushing Brent above $40 a barrel, in a second session of solid gains as investors hope for relief from the global oversupply.
US benchmark West Texas Intermediate (WTI) for delivery in April jumped $1.98 to $37.90 a barrel on the New York Mercantile Exchange.
In London, Brent North Sea crude for May delivery advanced $2.12 to $40.84 a barrel, its highest close since early December.
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“Despite the fact that stockpiles are going higher, the market is hoping that we’re going to see a reduction in production in the US,” said Bart Melek of TD Securities.
“Reductions could very well be a lot stronger than anyone thinks mainly because drilling activity is considerably down,” he said. The number of active drilling rigs in the United States fell last week to the lowest level since December 2009.
Comments on production by the energy minister of the United Arab Emirates on Monday were taken as a positive signal. Suhail Mazrouei said current prices “are forcing everyone to freeze. So I think it is happening as we speak.”
Saudi Arabia, Russia, Qatar and Venezuela last month agreed to freeze output at January levels if other producers followed suit.
“All this talk about a freeze has been helping to sustain the recent rally,” said John Kilduff of Again Capital.
But he pointed out the market still has no details about a producers meeting that could take place on March 20.
Melek said the market found positive signals for oil demand after China unveiled over the weekend its five-year economic plan and the US reported Friday robust jobs growth of 242,000 payrolls in February.
“It’s all reversing a lot of the negativity we’ve seen earlier in the year,” Melek said.